Drax running out of steam with 77% drop

The giant coal-fired power station in Yorkshire, which accounts for around 7% of the UK's electricity generation, saw half-year pre-tax profits collapse 77% to £33 million.

Even after stripping out unrealised losses on derivative contracts of £83 million, Drax's underlying profits are still lower by nearly a third.

UK electricity consumption is down 6%, which with a worldwide glut in gas supplies has been forcing wholesale electricity prices down this summer, by 35% to £36.40 per megawatt hour.

At the same time the cost of coal, which fuels Drax, has remained stubbornly high, on average £24 per MWh against £23.60 a year ago. That has seen its profit margins squeezed from about £32 for every unit of electricity produced to around £12.

Of the collapse in consumption, chief executive Dorothy Thompson said: "It's a very unusual movement. In fact it's unprecedented in my experience."

The drop is tracking the fall in gross domestic product, which shows Britain is in its worst recession since the war.

Drax raised £108 million in a share placing in the summer to refinance its borrowings after its debt was downgraded by the credit rating agencies.

It today said it will pay an interim dividend of 4.1p a share, at a cost of £15 million.